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Asia ETF Roundup (Market) – March 2021

Rate hikes in Brazil and Russia.

Jackie Choy, CFA 08.04.2021

For the latest ETF industry news, please refer to our “Asia ETF Roundup (Industry) – March 2021”.

Major Markets Performance

A USD 1.9 trillion massive stimulus bill was passed in the U.S. Amongst other things, it includes direct payments to Americans, unemployment and state and local government benefits. Meanwhile in Europe, rising coronavirus cases were noted and new restrictions imposed in some countries. Elsewhere, the Suez Canal was blocked by a cargo ship for six days, affected world logistics somewhat and sent oil prices higher. The Morningstar Global Markets Index and Morningstar US Market Index ended March 2.6% and 3.6% higher, respectively. The S&P 500 Index and Dow Jones Index notched new highs. Asian markets’ performance was mixed. Chinese equity market fell 6.5% while stocks in Singapore rallied, climbing 6.1% during the month (proxied by their respective Morningstar indexes in U.S.-dollar terms).

The ICE USD Spot Index gained another 2.6% in March, putting its year-to-date appreciation at 3.6%. The Euro and many Asian currencies depreciated against the U.S. dollar. In particular, the Japanese Yen and the Thai Baht both fell 3.6% against the greenback. The Chinese Yuan also reversed its course in March, weakening 1.5% against the U.S. dollar to put its YTD performance at -0.2%.

Precious metals had a bad month. Silver plunged 10.1% in March while the prices of gold and platinum declined 3.0% and 1.8%, respectively.

performance

Economic and Market News

Rate Hikes in Emerging Markets

  • Brazil Hikes Rates by 75bps – On 17 March, the Central Bank of Brazil raised interest rates by 75bps to 2.75% amid elevated inflation. This was the first time since July 2015 that the Bank has increased interest rates.
  • Russia Hikes Rates by 25bps – On 19 March, the Bank of Russia hiked its key interest rate by 25bps to 4.50% amid elevated inflationary pressure. The Bank had cut rates in July 2020 to a record low of 4.25% and the previous hike took place in December 2018. In the press release explaining its latest move, the Bank stated that it “holds open the prospect of further increases in the key rate at its upcoming meetings.”

 

China Economic Data: Deflation of 0.2% in February; Official PMI Rises to 51.9, Caixin/Markit PMI Slips to 50.6

  • China remained in deflation territory in February, with a CPI reading of -0.2%. This compared to a -0.3% reading in January.
  • China’s Caixin/Markit PMI reading further narrowed to 50.6 in March from 50.9 in February and 51.5 in January. Meanwhile, the official PMI in March edged up to 51.9 from 50.6 in February.

About Author

Jackie Choy, CFA  Jackie Choy, CFA is the Director of ETF Research for Morningstar Investment Management Asia

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